It’s difficult to imagine someone could sell a home without the owner knowing – or that a purchase could be made under fraudulent terms without the buyer realizing – but situations like this are happening right now in Canada.

The number of people whose homes are being sold without their knowledge is increasing, spurring many conversations around how Canadian homeowners and homebuyers can protect themselves.

This conversation is more important than ever as title fraud not only continues to grow but also constantly evolves meaning being prepared for anything is the only option.

Understanding the evolving threat of title fraud 

Title fraud is when someone steals your identity or impersonates you to get a mortgage in your name. Transfer fraud is when the person who steals your identity uses it to sell the property itself.

While these fraudulent transactions have been occurring for many years, they can be very difficult to detect as fraudsters are constantly changing their approach. 

As the digital landscape advances, so does fraud. For example, the falsified documents used in recent cases have reached a level of sophistication previously unseen in the Canadian real estate industry. 

This is something the industry is working together to combat, from adapting processes and establishing best practices to exploring new technologies as part of the solution.

However, this will take time and the results are uncertain, which means it is important for consumers to take all the necessary steps to protect themselves now and in the future. 

A double-edged sword 

When title fraud occurs, it impacts everyone involved, including both the homeowner and the purchaser.

If both parties purchased title insurance, they’re in luck, as it will not only help with compensation for losses incurred, but also includes a “duty to defend.”

This means that when title fraud is reported to the company the homeowner and/or purchaser holds a title insurance policy with, they will begin to navigate the process of restoring the title for that party.

This includes ensuring the matter is reported to the police, navigating the legal process and accompanying expenses a homeowner may incur while dealing with any title issues, within the limits of their policy .

If title insurance was not purchased by the homeowner, they will have to prove that real estate title fraud has occurred, which is no easy feat.

It can take significant time, money and effort to restore a home’s title and/or remove any fraudulently registered mortgages. Additionally, until the title is restored, the original homeowner will be unable to sell or mortgage their home, potentially derailing important financial plans. 

As for the purchaser, if they did not purchase title insurance when buying the home from the fraudulent individual or group, they will unfortunately have limited recourse.

They do not own the home and will have no way of recovering the money they spent on the purchase, absent what will almost certainly be long and unpredictable legal proceedings.

Planning for a better tomorrow 

As our industry continues to transform in response to new technologies, we will work to detect the threats that come with this, including more sophisticated forms of fraud. However, it’s important to note that this needs to be a team effort.

To truly combat fraud, we need support from both the government and our industry peers. 

For example, we’d like to see the government introduce stronger penalties for perpetrators of mortgage fraud crimes.

The people or groups who are committing these crimes need to face appropriate consequences – and those thinking about committing these crimes need to know they can and will be punished.

We also hope to see more funding and resources invested in local police departments specifically for financial crimes. We truly believe this could help stop the crimes like fraud before it’s too late. 

The real estate industry also has an important role to play in identifying ways all parties can work together to continuously monitor for and prevent fraud.

Real estate professionals, more specifically, can help in the near term by communicating the benefits of title insurance to ensure the homeowners they work with are protected. 

FCT encourages all homeowners or potential homebuyers to speak to the professionals they’re working with about purchasing title insurance to ensure they are protected against any potential risks that may arise when owning a home, including those detailed in this article.